By Annika Johnson and Manfred Keil | Inland Empire Economic Partnership
On Feb. 25, the Los Angeles Times ran a front page article titled “Inland Empire Logistics Industry in a Slump: the Area’s Storage and Warehousing Jobs Shrank in 2023, for the first time in 20 Years, Workers are Worried.” While factually correct (employment in logistics fell in 2023), jobs in the logistics industry (transportation, warehousing, wholesale) have increased by 19% since the start of economic recovery in May 2020, including a peak of 27% in March 2022 followed by an adjustment from overshooting. Logistics employment growth continues to be higher in the Inland Empire than at the state or national country. Hardly a picture of economic pain.
The article painted a relatively bleak picture of the current economic situation in the Riverside-San Bernardino-Ontario Metropolitan Statistical Area, including the fact that the current unemployment rate in the region has reached 5.1% while the national rate is 3.7%. It fails to mention that California’s unemployment rate at 5.1% is lower than only Nevada’s. Accounting for seasonal fluctuations, the Inland Empire’s current unemployment rate is 5.7%, granting the Times argument more credibility.
At our recent State of the Region conference, we stressed that painting a bleak picture of the Inland Empire based on recent developments in the logistics industry is misleading.
While we do not deny long-term potential difficulties (automation, environmental costs, relatively low wages) and short-term challenges (over-hiring, resulting from an adjustment in consumer preferences to pre-pandemic patterns from goods to services) which the industry faces, the Inland Empire remains California’s poster child of the post COVID-19 recovery. Our area saw less employment decline, and ended with 9% higher employment compared to October 2019, the period immediately before the downturn. In fact, it outpaced the U.S, California, and the Greater Los Angeles MSA’s employment increases by 4%, trailing only Stockton-Lodi among the 13 largest MSAs in California. Even during the recent logistics downturn, overall employment in the Inland Empire grew at about the same rate as elsewhere in Southern California.
The Times article correctly points out that the Inland Empire was the first in Southern California to recover jobs lost during the pandemic recession, from March 2020 to April 2020.
Differently from the Times’ claims, this did not happen until December 2021 — using the residency-based Current Population Survey, or CPS — or October 2021 — using the establishment survey Current Employment Statistics, or CES. The difference in surveys is important for the Inland Empire, the CPS includes commuters while the CES does not. Either way, the Inland Empire took 3-6 months longer to recover all the jobs.
The article points out that Orange County did not recover the jobs lost for another year, and LA County two years. According to the residency-based CPS survey, however, even to this day neither Orange County nor Los Angeles County have recovered February 2020 employment levels. We assume the Times article used the establishment survey. Even based on the CES, Orange County only added 60,000 jobs, while the Inland Empire had more than twice as many –135,000. Los Angeles County, according to the CES, has an extra 100,000 jobs, but it also has roughly twice as many residents as in the Inland Empire. And based on the prevalence of commuting from the Inland Empire, it is likely that a significant fraction of the Greater Los Angeles MSA jobs were filled by our residents. For 2023, employment in the Inland Empire grew by 1.9% from December 2022 to December 2023 (not the 1.2% reported in the Times based on yearly averages), which is at par with the rest of the Southern California region.
The bottom line: It is hard to see how “workers are worried” when both employment and the labor force have returned to pre-pandemic levels in the Inland Empire. Even if we use the establishment survey, the Inland Empire has been the job-creation powerhouse. We see an inversion of the Great Recession’s “bifurcated recovery” in the post-pandemic period. In 2008-2009, the Inland Empire was devastated as the housing bubble burst. Today, its swift recovery, can be partially attributed to stability in employment growth by the logistics industry.
Despite the strengths of the recovery originating in the logistics sector, we recognize the need for diversification.
The Inland Empire is the 12th-largest MSA in the United States by population, but ranks 302 out of 380 for GDP per capita, a standard measure of the wealth of a region. The concentration of workers in low-productivity (and consequently, low-wage) sectors including, but not limited to, logistics keeps our enthusiasm for the current economic situation in check. Also note that lack of diversification hurt the IE when the region’s defense and aeronautic industry collapsed in the 1990s and manufacturing and construction jobs left the area following the Great Recession.
To bring well-paying jobs to the Inland Empire, we must first create opportunities for education.
Today, roughly 24% of Inland Empire residents between the ages of 25 and 69 hold a bachelor’s degree or higher, compared to 38% in the U.S. This creates a concerning mismatch between the needs of companies here and the labor force specialization. As the “age of automation” approaches, this issue becomes increasingly salient. The returns to education are widely documented in academic literature, and a workforce with an increased higher education rate would attract higher-productivity firms.
The logistics sector is far from slumping – instead, it burgeoned the Inland Empire’s leading recovery. However, education and diversification will promote the region’s long-term economic health and resilience amidst challenges to come.
Manfred Keil: Chief Economist, Inland Empire Economic Partnership, Associate Director, Lowe Institute of Political Economy, Robert Day School of Economics and Finance, Claremont McKenna College; Annika Johnson: Analyst, Lowe Institute of Political Economy.
The Inland Empire Economic Partnership’s mission is to help create a regional voice for business and quality of life in Riverside and San Bernardino counties. Its membership includes organizations in the private and public sector.
